The Justice Department plans to terminate Operation Choke Point, an Obama-era law enforcement crackdown on scam consumer transactions that conservatives characterized as an attack on gun sellers and legal businesses. It concludes one of the more brazen misinformation efforts in recent political history — with misinformation triumphing.

The idea behind Operation Choke Point, initiated in 2013, was to prevent consumer fraud by limiting access to the financial system. Any transaction that requires a deduction from a bank account has to go through what’s called the Automatic Clearing House. Only banks with access to the payment system can facilitate those transactions.

Banks, of course, have certain responsibilities to flag suspicious activity, under the Bank Secrecy Act and anti-money laundering statutes. Banks must identify that their customer is legitimate, to ensure that they’re not implicated in a fraud scheme. So Operation Choke Point heightened scrutiny on banks who failed to raise concerns about questionable transactions on their networks. In presentations to banks, regulators and law enforcement highlighted business transactions with high rates of customer disputes. It was already the bank’s responsibility to report these; DOJ was just warning banks to be vigilant.

Choke Point was pretty effective. In 2014, Four Oaks Bank in North Carolina paid over $1 million in fines after giving access to a third-party payment processor to process dubious payments for online payday lenders, who removed funds from customer bank accounts without authorization. Four Oaks made $800,000 in fees from the third party, so the penalty actually cost them money, a rarity in banking cases.

This made the payday lending industry very nervous. Several lenders had recently popped up online, using tribal territories as a home base and asserting exemptions from state interest rate caps. By closely monitoring the banking system, the Justice Department was trying to limit the ability of these and other scam businesses to operate. Banks didn’t like this either, because they were making lots of money in fees from petty thieves to look the other way, and they didn’t want to have to file paperwork with government regulators calling out the fraud.

The initial pushback was predictable, with the right arguing that Operation Choke Point was a bullying tactic to kill legitimate businesses. Former Federal Deposit Insurance Corporation chair William Isaac was hired to lobby through the media, warning Choke Point could lead to crackdowns “on convenience stores selling large sugary sodas, restaurants offering foods with high trans-fat content or family-planning clinics performing abortions.” Payday lenders filed a lawsuit, which was due to start discovery this year.

But then payday lenders found refuge in a new argument: the Second Amendment. Members of Congress wailed about the heavy hand of government engaging in an “indiscriminate dragnet” on job-creating entrepreneurs, particularly gun sellers. They filed legislation to roll back the initiative and received donations from the payday lending industry afterward. They elevated the case of Tiffany Gaines, founder of the startup Lovability Condoms, who had her application for payment services denied by a third-party payment processor that was a subsidiary of JPMorgan Chase.

Behind the scenes, lobbyists were creating a PR nightmare for the Justice Department. A group called the Third Party Payment Processors Association openly warned congressional staffers that they would “start cutting off things liberals like, like birth control” if Operation Choke Point went into effect.

In other words, they wouldn’t interpret Choke Point the way DOJ sought, based on customer complaints or charge-backs, but based on their own version of morality, designed to make government look overbearing. Gaines’s company had never had a single return when Chase denied payment access to her. And other ancillary services, including one that produced condom cases, were getting dinged as well.

So while it looked like conservatives were defending the honor of sex-positive small businesses, they were actually working with these payment processors to generate complaints and embarrass regulators into calling off their crackdown. It was a form of lobbying through threat: regulate us, and we’ll make life so miserable for innocent bystanders that you’ll drop the regulations.

It worked. The FDIC rescinded a footnote that cited possible “high-risk” businesses for banks to watch out for (it didn’t ban working with those businesses, just highlighted them for fraud potential). And three years later, banks and their partners in crime have gotten their wish. Assistant Attorney General Stephen Boyd, in a letter to Congress, said that “law abiding businesses should not be targeted simply for operating in an industry that a particular administration might disfavor.” Boyd added that the initiative is over and “will not be undertaken again.”

Incredibly, in the letter Boyd also admits that subpoenas issued as part of Operation Choke Point “led to the discovery of other criminal activity involving certain individuals and non-bank entities.” One such case, against payday lender and NASCAR driver Scott Tucker, yielded a $1.27 billion payout and pending criminal charges. So Boyd, in announcing the shutdown of Operation Choke Point, also admitted that it worked.

Karl Frisch, executive director of Allied Progress, a consumer rights group, said in a statement: “Ending this program will make it easier for financial predators and other unscrupulous industries to get the resources they need to carry out their deceptive and frequently unlawful business practices.”

Top photo: Multiple lending shops advertise their businesses in Albuquerque, N.M., in 2015.

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